Good governance and accountability issues have become a serious concern in Indonesia after the economic crisis and subsequent political transition in 1998. Consequently, the Indonesian government has increasingly given attention to the application of performance measurement for the governmental agencies, including local authorities, as part of bureaucratic reform and good governance practices. The purpose of this article is to review the regulations and guidelines while examining issues and consequences of implementing performance measurement system in Indonesian local governments using descriptive and analytical methods based on secondary data. Although a performance meas- urement system has been implemented in Indonesia for 14 years, the results have been far from satisfactory. The Performance Management System (PMS) regulation is quite comprehensive, except it lacks a punishment and reward system. Some evidence demonstrates implementation issues such as lack of compliance, lack of integration between planning and budgeting, and inaccurate indicators and data reporting.